According to portfolio manager William Scapell, CFA, the yield of CPXIX is comparable to that of the big three ETFs: the iShares S&P U.S. Preferred Stock Index, the PowerShares Preferred Portfolio and the PowerShares Financial Preferred Portfolio.

"Compared to these three ETFs," says Scapell, "the income is similar, but depending on the share class, total return-income plus price return-has been better.

"We actually fish in a much bigger and deeper pond," he explains. "The ETFs only buy exchange-traded preferred securities, and there are a lot of preferreds listed on the NYSE, but it's a little bit less than one-quarter of the total market of preferred securities."

He continues: "The OTC preferred market in U.S. dollars is larger than the exchange-traded preferred market. In addition, there is a large foreign-currency-denominated preferred market. We have a far larger market to fish in because we buy in all these markets."

Also, Scapell says, "ETFs are not focused on fundamentals and values. They're simply buying index weights, which are derived from the market to capitalization of the securities out there. Our strategy is to focus first on the fundamentals of the companies, and then from our relative value overlay, we select the best securities from a risk-reward standpoint. By doing this, we've been able to perform better in good markets and bad ones."   

The Cohen & Steers fund's year-to-date performance as of July 31, according to Bloomberg, was 5.98% and for one year it was 12.86%. That compares to the iShares S&P U.S. Preferred Stock Index's returns of 3.06% and 5.58%, respectively, and the PowerShares Preferred Portfolio's returns of 3.45% and 6.81%, respectively.

One advisor who likes the CPXIX fund is Nicholas Laverghetta, CFP, principal of NCM Capital Management LLC in Ramsey, N.J. "I use CPXIX in my client portfolios," he says. "I believe that in the preferred area, an investor is better off with a professionally managed fund because they are different types of preferred securities and I'd rather have an expert pick and choose which ones should be in the portfolio."

The $789 million Nuveen Preferred Securities Fund (NPSAX), an open-end fund launched in 2006 just before the market crash, also has managed to do well despite its heavy weighting in financials. The fund is 95% allocated to preferred and hybrid securities, with the balance in other fixed income and cash. It has a 1.12% expense ratio.

"We invest in both the retail side of the market as well as the institutional side," says portfolio manager Douglas Baker. "On the retail side, it's easier for investors to buy and sell because of the smaller par shares, and the fact they trade on an exchange in a similar fashion to stocks."

Year to date through July 31, the fund's A shares were down 0.61%, but were up 12.263% over the past year during the same time frame.